Separation from Spain would have Brought Severe Problems for Catalonia

The Catalan independence referendum, held in late-2017, threw Spain and Catalonia into a severe political crisis and has created uncertainly for foreign investors inside Catalonia.

What fate would the Catalans have embraced had Catalonia broken away from Spain after the referendum?

Catalans from all walks of life would have suffered severe problems had the pro-independence camp gotten what they wished for in the referendum.

Here’s some food for thought for the Catalans who voted in the referendum and those who didn’t, and for others who were keen spectators from Europe and elsewhere.

State Structures: Inception of an independent state requires the setting up of the essential state structures, including a central bank, tax authority, a judicial system, social security, a diplomatic service and even an army.

Though most of these state structures are available to Catalonia as a Spanish state/province, there are obvious concerns whether these elements are self-sufficient and mature enough to assume the responsibilities of a newly formed state.

Chaos: Had Catalonia become a sovereign state, greater political uncertainty would have arisen. There would be political chaos between the ones who opted for independence and the ones who didn’t.

The ones who sought to remain with Spain, or at least didn’t actively support pro-independence campaigns, could have encountered rage and infuriated gestures from the opposite camp immediately after independence.

Debt, Currency, Exodus of Business: Moreover, Catalans would then have to assume a significant part of Spain’s debt. They would have to find a currency other than the Euro, as Spain would have vetoed Catalan membership in the Euro Zone.

Without a confirmed currency in the market and with political uncertainty, there would have been a likely evacuation of multinational and Spanish companies from Catalonia to other parts in Spain. Already some multinational and Spanish companies have either left or announced they would have left Catalonia immediately after the last independence referendum.

Access to EU Market: If membership to the European Union (EU) was delayed after Catalonia’s independence, Catalan products would have lost the privilege of unrestricted access to the EU market.

This newly independent state would have lost the leverage of entering the EU member states’ markets as a free trade zone – a leverage its commercial products enjoy now as Spanish products.

Duties on Catalan goods and services would have been imposed not only by Spain, but also by other EU member states. Moreover, in times of economic disasters, Catalonia could not have called upon the help of the European Stability Mechanism (ESM) and the European Central Bank (ECB).